The loan documentation is a key document for ensuring the project sponsor applies the Equator Principles beyond the signing of the loan agreement, right through the construction and operation, and where appropriate the decommissioning, phases of the project.

Failure to comply with the loan covenants may prevent or delay the project sponsor being able to drawdown on the loan, or even an event of default whereby, the lenders are entitles to cancel the loan, and all monies lend are immediately payable by the borrower.

The work is being undertaken by the Chinese Academy for Environmental Planning (CAEP), in cooperation with the Global Environmental Institute (GEI) and the University of International Business and Economics. The first draft is now being discussed, the GEI said.

A report released by the CAEP last week said the country lacked comprehensive environmental protection policies in its overseas projects, although investment had been expanding.

Statistics show that between 2002 and 2006, China’s overseas non-financial direct investment grew by 60 percent annually. By the end of 2006, 5,000 Chinese companies had set up nearly 10,000 directly invested firms and invested $90.6 billion in 172 countries.

China’s overseas investment and aid mainly focuses on exploring oil and other resources, processing, manufacturing, and construction in African and Southeast Asian countries. Without proper management, such projects are likely to cause environmental problems, the report said.

In April, several companies, including China Mobile, Haier Group, and China International Marine Containers, joined “Caring for Climate”, a voluntary UN initiative to combat global climate change. Liu Meng, director of UN Global Compact China Office, told China Daily earlier that these companies’ participation suggests that China’s business sector is catching up with its international counterparts on climate issues.

China National Petroleum Corporation, the country’s largest oil producer, has pledged to stick to stringent environmental requirements before deciding on overseas projects.

Currently, only four banks in China have either formulated independent environmental standards for financing, or have joined the United Nations Environment Program Finance Initiative to reduce environmental risks.

On 3 December representatives from 25 EPFIs met to discuss the ongoing development of the Equator Principles. The meeting was hosted by ING Group. The discussions focussed on Equator Principle governance and the management structure, reporting, and shared good practice.

On 4 December the EPFIs met with 15 NGOs at ABN Amro’s headquarters. A pre-agreed agenda was followed based on items of mutual interest, which included governance, transparency, and grievance mechanisms at the project level.

On 5 December EPFIs were pleased to be invited to meet 23 OECD Export Credit Agencies in Hamburg, hosted by Euler Hermes. The meeting provided an opportunity to better understand each others approach on transparency, experience in implementing the IFC Performance Standards, and how to further cooperation between the EPFIs and ECAs. The EPFIs also presented their experience in implementing the Equator Principles. In each instance, the meetings proved useful in furthering a better understanding by all sides and facilitating future discussion.

The risks associated with financing projects can vary significantly according to the geographical location of the project. While many projects that the banks are asked to consider financing are in compliance with national legislation and permit requirements, they may fall short of international standards and best practice. A detailed understanding of the project’s political and legal framework is required in order to judge the extent to which national requirements meet the risk management needs of international financial organisations.

National application of human rights law is one of the most important tests of its efficacy. This article examines the integration of international human rights law into Serbia’s legal system. The paper argues that the use of human rights language does not necessarily indicate the proper and correct use of human rights norms

The paper covers the following:

an overview on the intersection of international and national law with special reference to Serbia and Montenegro

the existing legal framework for the integration of international human rights law

an examination of the propriety of human rights law language discourse

a discussion on the separation of the executive and the judiciary

The paper makes the following conclusions:

the legislative framework in Serbia favours the integration of human rights law

despite some successes there some legislative acts and a lack of human right jurisprudence indicates that international human rights law has not been properly integrated into the legal system

there has been a misuse of human rights law and clash between judicial and political discourse on human rights

the inadequate training of the judiciary has led to judicial deference to the executive branch of government.

The Equator Principles website now has a “disclosure section” which provides information on how the EP signatories are progressing with their annual disclosure reports.

Disclosure Reports

The progress made by the 56 EP signatories on the 13 December 2007 was as follows:

33 – Reported (including some in the 1st year grace period)

10 – In the 1st year grace period

9 – No information made available

4 – Will report soon

It is encouraging to note that EP signatories in their 1st year grace period are producing disclosure reports. A few of the signatories clearly need to get on and prepare their report in order to comply with the requirements of Principle 10 . This section provides a valuable addition to the EP website with useful links to the available disclosure reports.

I am delighted that BankMuscat is the first bank from the Sultanate to join a select and of environment-conscious financial institutions. Environmentalists from across the world have lauded the pristine beauty of our beloved country. Given these lessings, and the vision of His Majesty Sultan Qaboos bin Said, to manage the growth and development of the nation while preserving the natural beauty of Oman, we believe it our duty to take meaningful steps in the same direction.

There were some excellent discussions on the Equator Principles (EP) at the Ethical Corporation – Sustainable Finance Summit. The main hot topics were:

The need to manage the success of the principles. The need to prevent their extension to areas other than Project Finance weakening the brand, due to insufficient leverage in such areas.

The EP’s have lead to an unprecedented level of collaboration by Financial Institutions.

There is a lack of mechanisms for demonstrating how the adoption of the EP’s have contributed to business performance and financial benefits, but despite this FI’s are see these issues as key to their core branding.

There is a need for a pragmatic approach to their application, in certain situations when good project sponsors and FI’s have turned down projects with high potential environmental and social risks, the projects have been progressed by weaker parties and consequently developed more severe environmental and social problems.

There is a need to manage expectations about what the EP’s will achieve – e.g. they have not been established to be a tool for equity.

There has been a lack of developing market banks and a notable absence of leading French Banks adopting the EP’s.

The need for sufficient lead in times to review Finance deals to avoid situations where problems are picked up too late on a project to enable compliance.

Some banks are striving to be leaders in sustainability, while others believe the EP’s have created a level playing field.

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Risk in Project Finance

This site considers current news, key issues, articles, and new regulatory and guidance information from different viewpoints, including banks, legal firms, project sponsors, consultancies and NGOs in order to provide a wide spectrum of opinions.
In order to demonstrate why risk management so important, the site provides information and conflicting opinions from those who support and oppose the finance of key project. It also includes an evaluation of the different views on the various management techniques.

Financial Institutions

The various approaches and guidelines have provided invaluable risk management tools for Financial Institutions, and while there will always be critics of some of the finer details, the overall benefits have been overwhelming and far reaching. The banks have shown a highly impressive degree of co-operation and innovation in their approach to environmental and social risk management.